by Travis Johnson, Stock Gumshoe | September 20, 2019 11:07 pm
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Source URL: https://www.stockgumshoe.com/2019/09/friday-file-two-new-small-cap-buys-in-hated-businesses-two-partial-big-tech-sales/
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I really like spoxf, they have over 200,000 global clients and they manage billions, I like the fact that they hold bullion and not paper claims to the metal. I purchased Sprott as an insurance policy. I also purchased MTAFF as a speculative investment. I buy options on Sand and have made some great dollars.
Thanks! Lots of good information here.
Hi Travis,
I cannot understand how you manage to control a stop loss trigger ( whether to act on it or not ) .
When a stock falls below a stop loss trigger that you set , will it not automatically be sold ?
At least that is what happened to me. For SHOP, I set a stop loss at 325. And it automatically sold when it hit below 325.
I could not prevent it from being sold once it hit the stop loss .
Could you please clarify if you do it differently that what I did ?
Thanks
A lot of us have alerts on our watch list where we set up a stop loss triggers, but not a market stop loss. If you think that it will go back up you have not been forced out by a daily dip
A little clarification: Yes, if you merely want to be notified if a stock drops below a certain price, you would just add an alert or set up a watch list with the alert (which you can do with your broker or probably any number of websites).
If you want to actually sell, you would go into your brokerage account and place a stop loss order on that particular position. The clarification is, this order could be a standard stop loss (which becomes a market order when the stock drops to the price you set) or a stop loss limit (which becomes a limit order, and only sells at the limit price you set or higher) and then you have trailing stops (which can also be market or limit orders, and these adjust automatically by following your stock if it increases in value, so that you continuously have some protection against losing those gains).
Thing is, a stop loss market order is susceptible to selling you out on a dramatic drop in price, and a stop loss limit might not sell at all (because you’ve placed a limit on it). So you’d need to decide what’s more important to you. And I guess that’s why a lot of people simply prefer to set up alerts that merely notify them so you can address the news and decide what to do at that time.
I think Travis uses TradeStops for stop loss triggers….if goes below what you set as stop loss at closing, TradeStops alerts and you can decide if you want to sell or not at your bokerage . I use TradeStops, and recommend, think Basic is something like $198. a year.
Travis! Did a lot of research and Disagree with your promotion of Tiptree (TIPT). The facts I found are: This company has returned negatively to investors over the last 5 years. It has also reduced it’s dividend regularly during the same period. Revenues are up, but profitability is flat to down — last cycle TIPT didn’t earn enough money to cover their dividend. (you know that isn’t sustainable). As an added bonus, TIPT compensates its CEO and hierarchy at almost twice the industry average for that size company —- smells fishy to me and I am not currently looking for mackerel. Good luck though…..
Glad to hear another take, thanks. I agree that the past five years have been bad for them.
Hi Travis,
I know this write up was back in September. Would you still recommend TIPT?
Haven’t done my annual review on that one yet, it will be coming in the next week or two (they should report on or around March 12), but I have not bought or sold for several months and my holdings remain the same — last substantive note about this one was here: https://www.stockgumshoe.com/2020/11/friday-file-earnings-and-elections/
Travis, love the advice you provide to your members. Ive been a satisfied member since I joined. Keep up the great work.
Can you shed some light on how you analyze stocks for them to get on your watch list? Id like to understand what you look for and if possible what your thought process is when analyzing potential stock investments.
Generally a stock goes on my watch list if I like something about it — the management, the “story”, the financials — but am not yet convinced that I understand it enough to invest, or believe that it is not quite appealing but would be at a better price, or if they prove out more of my thesis with another quarter or two of data.
Dear Travis, I am an Irregular, and comment even more irregularly. Thanks for your analysis, especially on the insurance sector, always insightful. I have two sets of questions. The first is related to your selling of Apple and your lack of fretfulness over the selling of it because you have mutual funds and/or ETFs that track a broader swath of companies and Apple comprises up to 4 percent of some of them; therefore, you are still invested in Apple even after no longer having it as an individual equity holding. So at what point does it make sense (if sense is the right word) to own the mutual fund (or other investment vehicle) that has a company as part of its holdings than to ‘go solo’ on that particular stock? Another example is UPS, which is on your watch list and I believe in the Vanguard Dividend Growth Fund. Why not buy more of the fund rather than UPS shares? Presumably, you have the fund because you agree with its management style, and it has an acceptable management fee and has performed well.
The second set of questions concern the approaching (though not inevitable) parity of the British Pound to USD and the precarious Brexit situation stressing UK companies, some that are still financially viable but overcast by the Brexit cloud, perhaps unfairly. Are there UK publicly traded companies that have attracted your attention? I remember that you had owned a British insurance company but I forget the reason you sold it. I also have read that some UK firms have been bought by Chinese entities, for example, Greene King by Li Ka-shing’s holding company, and Thomas Cooke by Fosun (whose shares you sold). So perhaps, UK firms are attractive for acquisition to some deep pockets, which may not necessarily be immediately rewarded. But that is another story. Thank again.
Hi chengunlam… in truth, it’s probably almost always better to buy a diversified fund than it is to try to pick stocks. The odds of success are far better, mostly because the odds of precipitous failure decrease markedly. But you don’t get many big wins, either, and it’s not as fun.
I do like researching and investing in individual stocks, so I do a bit of both. There’s no reason to buy a diversified fund to get access to a specific stock, if you do that then you’re overthinking it and getting away from the main benefit of ETF and index investing (that you can get market-average returns and spend your time doing something more productive — and probably, if you’re a buy-and-hold passive index investor, you’ll probably get above-average returns because you won’t be selling at the bottom and buying at the top like most people tend to want to do)… but there is reason to buy a diversified fund to get access to a broad swath of the market.
I mention the Apple example mostly because when it comes to mega-cap companies, it’s useful to think about the fact that you’re really betting on a huge part of the market. Apple and Microsoft and Berkshire Hathaway and Facebook and ExxonMobil are stocks that almost everyone owns a big chunk of if we have any index fund or big mutual fund exposure… and for most of us, it’s quite possible that even if we also own the stock individually we are technically “underweight” — For example, about 4% of an S&P 500 index fund will be in Apple shares, but Apple is only about 1.5% of my individual stock portfolio, so the net effect is that I’m really betting that other stocks will be more appealing than Apple in the long run. In that context, among large cap companies I own I’m overweight Berkshire Hathaway and Alphabet and underweight Apple and Amazon, for example.
I don’t think that is the basis for any real brilliant insight to guide your path, comparing your portfolio to the S&P 500 is more of a task for institutional investors who have to make sure they don’t do worse than the S&P in any given quarter so they don’t lose their jobs, but it’s a reminder that the greatest risk for most investors is that we overthink everything. The more I think and trade, the more mistakes I’m likely to make.
I do tend to keep my active and passive portfolios separate, and try to allocate roughly half of my market-invested assets to funds and half to individual stocks and similar investments (or speculations). I don’t think much about the holdings of the funds, except when I’m trying to remind myself (as this week) not to overthink a transaction in a large cap holding.
And yes, I do think we’re likely to see some appealing investments in both the UK and on the Continent, though I haven’t made any recently. The valuations are getting awfully low. I did hold Lancashire a while back but became unconvinced of the sustainability of their path (though they’ve continued to do OK so far), and I did also hold Fosun for a while before I decided their reliance on short-term debt funding was just too worrisome to hold with any confidence. Glad not to be too involved with Thomas Cooke at the moment, that’s for sure, but the UK should be a ripe field for value investors who have strong stomachs… I’ll let you know if I find something I want to buy.
Dear Travis, Thanks for the thoughtful reply to my questions. As an aside: I was in San Francisco Airport and in the duty free shop was a bottle of Kweichow Moutai, for $1100! The same volume bottle of a single malt whisky from Scotland cost $75, I cannot imagine who would drink Moutai (I tried once), or buy one for a gift, because it is fiery, minimally processed jet fuel. NHK News (Japan) sometime back reported on attempts by Chines Moutai producers wanting to break into the US market (this is before the trade quarrel) but realized from tasting focus groups that Moutai was too harsh. So they decided to add flavors to adapt it to the non-China taste, flavors such as different kinds of fruits. I think the result would be fruit-flavored jet fuel.
Indeed, it’s horrible stuff. At least to my palate, though obviously plenty of people love it (and plenty of people hate my favorite single malts, too). I enjoyed my Kweichow profits, and the brand is powerful so they might turn it into something bigger, particularly because we all probably underestimate the incredible future buying power of the Chinese consumer, but the odds of mass market appeal outside of China seem slim.
Well, grabbing at that falling Kush knife hasn’t worked so far… vaping sentiment continues to nosedive, driving the shares lower. We’ll see, but if we get more full-on bans (like MA today, which banned e-cigs for its regulated marijuana dispensaries as well as nicotine e-cigs, for four months while health officials try to figure out what’s going on), then things could fall apart pretty quick for a company. Will keep an eye on it and look into it a bit more as the week progresses.
Thanks again for your insights. My only comment is that I believe the vaping debacle will get much worse. Prevalence of lung illness cases from vaping is skyrocketing. No BS. It’s truly astounding to see. I personally dealt with 2 cases yesterday in a small town. Both young healthy prior to onset of vaping associated lung illness. Both remain hospitalized. Not good. Weird thing is vaping has been around for a while and we’re just seeing this epidemic surge. Need Doc Gumshoe to do a full analysis but the situation is dire.
It has been crazy how these illnesses have seemingly come from nowhere, hopefully we all learn more soon. I’d be delighted to never see one of those things again, but it never occurred to
Me that they could be even worse than smoking.
Trade Note: PINC
Here’s an excerpt from what I wrote a few weeks ago when Premier (PINC) was showing a little post-earnings weakness:
The Spruce Point short attack announced today helped bring the shares further down still, with claims that Premier will be losing contracts right and left… perhaps as soon as this week. That’s certainly possible, some of their member hospitals are rolling through renewal periods for the first time since they took Premier public, but I don’t have any knowledge to back up or refute Spruce Point’s assertion that some of the big members will either not renew or will demand better deals.
The other concern, noted recently, is that Premier’s growth engine is not growing. That was exacerbated by their release of a survey last week that illustrates how slowly the transition to risk-based health insurance and reimbursement is going — and that kind of work, consulting on risk-based reimbursement and providing access to their huge cooperative member databases that include health outcomes data, is a major reason why I owned Premier. The cooperative buying network is good, but it’s essentially a glorified wholesale supplier relationship, and it makes sense that there will probably be margin pressure over time even though Premier employees and systems are embedded in their member hospitals. I expect the assertions that their earnings will be cut in half are hyperbole from Spruce Point, but certainly there’s no sign that those revenues are going to grow quickly.
So as I noted, I won’t let this become a major money-losing position because I don’t know enough to be confident about if there’s a floor for the share price (or what it might be), and, more importantly, the recent news from their division that I hoped would be a growth engine has been disappointing… which means that with no real growth in their higher-margin division, the upside potential seems to be lower than I had thought a year ago. I don’t know if Spruce Point is going to end up being right here, but I do know that I’m unwilling to stomach more than a 10% real loss in this position given the lack of underlying growth potential… and we just hit that price today, so I’ll clear this position from the Real Money Portfolio at roughly a 10% loss.